Make friends with credit

Credit makes the world go around. But the debt that comes with it can stop you in your tracks. If you develop a good relationship with it you could reap benefits. Make friends with credit. Here are some tips to establish, improve and maintain healthy credit.

Pay your bills on time
Your payment history makes up more than 1/3 of your credit score. So on-time payments are a must. By paying on time you also avoid late fees, penalties and interest rate increases.

Keep low balances
If you can’t pay balances off in full, try to at least keep them low. Aside from incurring interest, balances reported to credit bureaus are typically the ones shown on your statement before you make payment. As a rule of thumb, don’t use more than 30 percent of your available credit on any one card.

Limit applications for new credit
Each time you apply for credit, an inquiry is added to your credit report. This could signal you’re taking on too much debt or have financial problems. Wait until you need additional credit to apply for it.

Manage your overall debt
Your total debt, and your ability to pay it, makes up 30 percent of your credit rating. Credit bureaus look at mortgages, personal loans, auto loans, student loans and credit card accounts when they compute your score. If you have high debt, you’re less likely to be approved for more because you may not be able to repay it.

Monitor you credit activity
Your report shows your borrowing and repayment history. It’s the “who, what, where and when” of your credit history. It’s your responsibility to make sure it’s accurate. Download your credit report for free every six to 12 months at annualcreditreport.com to verify the information is correct. You can also get one free report per year from each of the credit bureaus. If you see any incorrect information, contact the credit bureau to correct or dispute the contents.

Using credit wisely means you’ll more likely qualify for a mortgage, better rates on loans and potentially more credit, if you need it. Plus, deposits may be waived for apartment leases and utility accounts, while insurance providers will offer better rates. And employers who run background checks will consider you a responsible job candidate.